We examine causes and consequences of relative income within households. We establish that gender identity – in particular, an aversion to the wife earning more than the husband - impacts marriage formation, the wife's labor force participation, the wife's income conditional on working, marriage satisfaction, likelihood of divorce, and the division of home production. The distribution of the share of household income earned by the wife exhibits a sharp cliff at 0.5, which suggests that a couple is less willing to match if her income exceeds his. Within marriage markets, when a randomly chosen woman becomes more likely to earn more than a randomly chosen man, marriage rates decline. Within couples, if the wife's potential income (based on her demographics) is likely to exceed the husband's, the wife is less likely to be in the labor force and earns less than her potential if she does work. Couples where the wife earns more than the husband are less satisfied with their marriage and are more likely to divorce. Finally, based on time use surveys, the gender gap in non-market work is larger if the wife earns more than the husband.

The John Bates Clark Medal is given every two years to the American economist under the age of 40 who is deemed most influential. Congratulations to Susan Athey, a Harvard professor, who won the award today! She is the first woman to win the award. I got to know Susan and her husband Guido Imbens […]